The three stages of transition to the single currency

  • Stage One, which is not expressly described in the Treaty, started at the turn of the 1990s and was characterised by efforts to achieve economic convergence. However, owing to divergence of the individual national economies at a time of economic contraction, the functioning of the European Monetary System was seriously disrupted and the exchange rate stability observed in previous years was not maintained. The exchange rate fluctuation band had to be widened to +/-15%;
  • Stage Two began at the start of 1994 and was a period of consolidation. A monetary policy coordination body – the European Monetary Institute, the forerunner of the future European Central Bank – was set up at the start of this stage. The economic and institutional conditions for entry into Stage Three were meant to be fulfilled during this stage. Stage Two was meant to culminate in the stabilisation of mutual exchange rates;
  • Stage Three – from the start of 1997 at the earliest and the start of 1999 at the latest – involved the changeover to the single currency, for which the Maastricht Treaty uses the previously introduced term “European Currency Unit” (ECU). The single monetary policy was meant be consistent with this. The European System of Central Banks (ESCB), consisting of the European Central Bank (ECB) and the national banks of the Member States, was planned to be established at the start of Stage Three. The ECB and its bodies was to be the governing element of the whole system.